Is China’s Economy Heading Towards a Hard Landing?

Is China’s economy heading towards a recession? Under such circumstances, would China secure its economic vitality in the future? How can China influence the world economy in a positive way?

The world has witnessed the rapid development of China over the past few decades, seeing it rise from a poor country, with a GDP of only 367.9 billion RMB in 1978, to become the world’s second largest world economy. The world witnessed China break through the 90 trillion RMB GDP threshold (around US$13.6 trillion) in 2018. China’s contribution to world economic growth has been maintained at 30% for six years. It has gradually become the driving force and stabilizer of the world economy. Against the changeable domestic and international situations, China’s economy is still progressing at a steady pace.

Containers are seen at the Yangshan Deep Water Port in Shanghai, April 24, 2018. (Photo/Agencies)

A topic of focus is China’s economic growth. The Chinese government admits that the country is now confronted with a severe and complicated situation, and downward economic pressure is rising during 2019 Two Sessions (annual sessions of the National People’s Congress and the National Committee of the Chinese People’s Political Consultative Conference). The overall goal of economic development this year is stable and high quality growth，while the anticipated GDP growth stands at a rate of 6 to 6.5 percent.

Is China’s economy heading towards a recession? Under such circumstances, would China secure its economic vitality in the future? How can China influence the world economy in a positive way?

These were all questions China Focus posed to 15 world renowned leaders from politics, academia, media and technology. Interviews include how former Pakistan Prime Minister Shaukat Aziz has seen China’s economy grow, why John Milligan-Whyte, executive chairman of the America-China Partnership Foundation, is optimistic about the future of China’s economy and how Lord Neil Davidson, member of the UK House of Lords, thinks the “collapse of China” is an absurd idea.

Huge Economic Potential

For years, China’s economy has been rising despite hubbub of doomsayers. Speculation includes arguments that China is doomed to failure, certain to experience a hard landing or facing for imminent economic collapse. However, facts and data have proved again and again the collapse of those nonsense. China’s economic development has always followed its own pace, and has steadily transformed from fast development to high-quality development.

Member of the UK House of Lords Neil Davidson

Lord Neil Davison, member of the UK House of Lords, told China Focus that he has long heard Western economists and politicians predict that China will collapse. It never has. In the past 30 years it has consistently been about how China will implode, China will fail, and it’s all going to be dreadful. But what’s entirely clear is that China has been moving steadfastly forward. China knows where it is going, it has a strategy and over and over again, it demonstrates that it is able to make its strategies come right. Lord Davison stressed that there will be ups and downs, but at least in his lifetime, China is certain to continue its success.

Graham Allison, political scientist and professor at John F. Kennedy School of Government at Harvard. His book Remaking Foreign Policy: The Organizational Connection, co-written with Peter Szanton, was published in 1976

Graham Allison, a Harvard University professor, expressed that he was an inherently optimistic person and has always been positive regarding China’s growth over the course of the last 10 years. Even though many outsiders have said China’s slowing down will result in a hard landing, it could result in an outright crash. Anything could happen. There’s no doubt that China is facing huge obstacles. But it has a very capable government, and has shown very determined leadership.

Executive Chairman of the America-China Partnership Foundation

John Milligan-Whyte, executive chairman of the America-China Partnership Foundation, is also optimistic about China’s economic development. He says with certainty that unless the European or American economies fail, China will perform better than other countries. This is because of the nature of the Chinese people, and the nature of where they are in their history, and the fact that they have a stable government. But China’s success depends upon the success of its neighbors. If its neighbors fail, China’s economic success will roll back.

Hu Zuliu, Chairman of Primavera Capital Group and an ex-director of Goldman Sachs

Speaking on development, Hu Zuliu, Chairman of Primavera Capital Group and an ex-director of Goldman Sachs, says China has had phenomenal success in its economic development. It is the so-called “China miracle”.

However, right now there are various downside pressures, and the economy could be affected by data, consumer spending, the stock market and trade. But such factors are only temporary, as China also has huge potential and the risk of recession remains minimal.

The Pain of Economic Transition

However, the giant is changing, with more focus on secondary, innovative and tertiary industries, leading to a new wave of economic expansion. The general situation this year is more complex, with uncertainties in the world economy increasing remarkably, and China’s domestic reform entering a “deep-water zone”, every step China takes will be confronted with greater resistance. Now, the ups and downs in China’s economy will affect the global economy, how should China face these challenges?

Shaukat Aziz, former prime minister of Pakistan

Former Prime Minister of Pakistan Shaukat Aziz told China Focusthat China has a flourishing private sector and also strong small and medium enterprises, which form the base of larger production.

Challenges will be there, change will happen, differences will occur, but the world has mentally adjusted to the fact that we have to be globally efficient to produce and sell things. If it’s not that way, you won’t be able to survive. Competition will always be there and exists now in the soft parts of manufacturing, design, branding and other areas. Those areas will also be affected.

Pascal Lamy, former Director-General of the World Trade Organization

Pascal Lamy, former Director-General of the World Trade Organization, emphasized China’s opening-up, saying that China opening its economy made it more efficient. It increased competition from foreign operators in areas where China agreed to open its markets, including manufacturing, some services and some parts of agriculture. Therefore, it was a good deal for both China and the world. And as a result of that, Chinese imports and exports both increased.

Hu Zuliu’s analysis shows that that past success mostly came from from low-end and labor-intensive manufacturing, exports and a very high rate of fixed investment, particularly in infrastructure. That model has worked well for China for a long period of time. However, it is facing increasing strain. China now will have to shift gears to a new growth model, including an economy more focused on consumers, services and innovation.

Hu argued that if China can succeed in making such adjustments, and succeed in this shift towards a new model, he is confident that China can achieve sustainable and moderately fast growth for many years to come. He suggested that China should stay focused on structural reforms to unleash its potential and boost the confidence of entrepreneurs, investors and consumers in its reforms. Hu hopes the Chinese government will not become over-reliant on short-term stimulus, but really focus on more long-term strategic reforms. Only reforms can bring about long-lasting dividends for China’s economy.